Bassett Announces Fiscal First Quarter Results
March 31 2022 - 9:00AM
Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today
its results of operations for its first quarter ended February 26,
2022.
Fiscal 2022 First Quarter Highlights of
Continuing Operations (Dollars in millions)
|
Sales |
|
Operating Income |
|
1st Qtr |
|
Dollar |
% |
|
1st
Qtr |
%
of |
|
1st
Qtr |
%
of |
|
2022 |
2021 |
|
Change |
Change |
|
2022 |
Sales |
|
2021 |
Sales |
Consolidated (1) |
$ |
117.9 |
$ |
101.7 |
|
$ |
16.2 |
15.9 |
% |
|
$ |
6.5 |
5.5 |
% |
|
$ |
5.6 |
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
$ |
83.5 |
$ |
70.3 |
|
$ |
13.2 |
19.0 |
% |
|
$ |
3.4 |
4.1 |
% |
|
$ |
4.8 |
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
$ |
64.1 |
$ |
60.4 |
|
$ |
3.7 |
6.1 |
% |
|
$ |
3.4 |
5.3 |
% |
|
$ |
1.1 |
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Our consolidated
results include certain intercompany eliminations. See Table 4,
“Segment Information” below for an illustration of the effects
of these intercompany eliminations on our consolidated sales and
operating income (loss). |
Although incoming wholesale orders remained
relatively strong for our first quarter of 2022, we began to make
progress in reducing the enormous backlog that has ballooned during
the eighteen months of the pandemic that preceded the start of our
fiscal year. Consolidated revenue grew by 16% and wholesale
shipments increased by 19% in the quarter. Operating income of $6.5
million was 16% ahead of last year primarily thanks to a strong
showing in our corporate retail division. Diluted earnings per
share of $0.44 compared to $0.37 for last year represented a 19%
increase.
The big story for Bassett’s first quarter, of
course, was the sale of the assets of our Zenith Freight Lines
subsidiary to J.B. Hunt Transport Services, Inc. for approximately
$87 million. Subsequently, we announced the declaration of a $1.50
per share special dividend that will be paid to shareholders on
April 6, 2022. In our income statement, we will classify Zenith
results as “Income from Discontinued Operations,” meaning that
Bassett is back to being a pure play furniture manufacturer,
wholesaler and retailer. Zenith went out with a bang in its final
full quarter under Bassett ownership, recording a net profit of
$1.3 million. For the most part, the past four weeks have been
“business as usual,” as J.B. Hunt, coupled with the previous Zenith
staff, continues to run our former distribution centers and
transport our products to our Bassett Home Furnishings stores and
to certain independent Bassett accounts. Once again, we are excited
about our new partnership with J.B. Hunt as we prepare to
manufacture a new product lineup that will be stocked in a new
Regional Fulfillment Center opening in Florida later this spring.
All eyes will be on our ability to offer rapid service to our
Florida stores and open market customers, which we believe can
significantly drive new sales in the future. We are pleased that
Zenith’s founder, Jack Hawn, will stay on and work with J.B. Hunt
and Bassett in a consultative role to help us realize our vision of
operating through a national network of Regional Fulfillment
Centers. Jack and his wife, Debbie, founded Zenith in 1973 and grew
it into the premier less than truckload (“LTL”) furniture
transportation company in the country. Their work ethic and good
nature has endeared them to the team at Bassett and their expertise
led to a successful closing chapter of Bassett’s ownership of
Zenith.
Incoming wholesale orders were down 6.8%
compared to 2021 but remained robust in comparison to the past few
years. 90% of the order shortfall to last year came in our Club
Level motion segment, where we still have a large backlog and where
we have been most affected by rising container prices. Orders for
our domestic upholstery and our outdoor products grew compared to
2021 and remain strong. Wood orders declined slightly, particularly
with our imported wood products that have been susceptible to
COVID-related factory shutdowns in Vietnam. Our inability to keep
pace with the incessant inflationary pressures that we are
experiencing cost us between 150 to 200 basis points in our
consolidated operating margins for the quarter. The material cost
in our upholstery operations was the biggest culprit as practically
every raw material involved with manufacturing a sofa, chair or
sectional has continued to escalate in price over the past eighteen
months. Recognizing this, we are reluctantly implementing our sixth
wholesale price increase in the new inflationary world of the last
15 months.
Corporate retail profits, on the other hand,
tripled to $3.4 million in the period as higher gross margins and
leverage from delivering our order backlog combined to produce
better results. We also enjoyed a strong Presidents Day promotion
to end the quarter, thus providing for the likelihood of continued
strong retail deliveries for the foreseeable future. We are also
busy evaluating our real estate portfolio of owned and leased
locations. Current plans call for the remodeling of three stores in
2022 while opening one new store and closing another. We also plan
to sell the real estate and building in one of our locations this
year while purchasing another in a new market.
On the whole, we were pleased with the quarter
although the aforementioned vulnerability that we have experienced
regarding cost pressure remains frustrating. As we wind down our
backlog over the upcoming months, the relationship between our
invoice price and our production costs will more closely align.
Concurrently, we plan to capitalize on the market share that we
have gained in the open market and the improved operating model in
our retail stores to make 2022 another strong year for Bassett.
Robert H. Spilman, Jr., Chairman and CEO
About Bassett Furniture Industries, Inc. Bassett
Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer
and marketer of high quality home furnishings. With 96 company- and
licensee-owned stores at the time of this release, Bassett has
leveraged its strong brand name in furniture into a network of
corporate and licensed stores that focus on providing consumers
with a friendly environment for buying furniture and accessories.
Bassett’s retail strategy includes stylish, custom-built furniture
that features the latest on-trend furniture styles, free in-home
design visits, and coordinated decorating accessories. Bassett also
has a traditional wholesale business with more than 700 accounts on
the open market, across the United States and internationally and a
logistics business specializing in home furnishings. For more
information, visit the Company’s website at bassettfurniture.com.
(BSET-E)
Certain of the statements in this
release, particularly those preceded by, followed by or including
the words “believes,” “plans,” “expects,” “anticipates,” “intends,”
“should,” “estimates,” or similar expressions, or those relating to
or anticipating financial results or changes in operations for
periods beyond the end of the first fiscal quarter of 2022,
constitute “forward looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended. For those
statements, Bassett claims the protection of the safe harbor for
forward looking statements contained in the Private Securities
Litigation Reform Act of 1995. In many cases, Bassett cannot
predict what factors would cause actual results to differ
materially from those indicated in the forward looking statements.
Expectations included in the forward-looking statements are based
on preliminary information as well as certain assumptions which
management believes to be reasonable at this time. The following
important factors affect Bassett and could cause actual results to
differ materially from those indicated in the forward looking
statements: the effects of national and global economic or other
conditions (including, without limitation, the effects on revenue,
supply and demand resulting from the duration and extent of the
COVID-19 pandemic) and future events on the retail demand for home
furnishings and the ability of Bassett’s customers and consumers to
obtain credit; the success of marketing, logistics, retail and
other initiatives; and the economic, competitive, governmental and
other factors identified in Bassett’s filings with the Securities
and Exchange Commission. Any forward-looking statement that Bassett
makes speaks only as of the date of such statement, and Bassett
undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indication of future
performance, unless expressed as such, and should only be viewed as
historical data.
|
Table
1 |
BASSETT FURNITURE
INDUSTRIES, INC. AND SUBSIDIARIES |
Condensed
Consolidated Statements of Income - unaudited |
(In thousands,
except for per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
February 26, 2022 |
|
February 27, 2021 |
|
|
Percent of |
|
|
Percent of |
|
Amount |
Net Sales |
|
Amount |
Net Sales |
|
|
|
|
|
|
Net sales of furniture and accessories |
$ |
117,864 |
|
100.0 |
% |
|
$ |
101,655 |
|
100.0 |
% |
Cost of
furniture and accessories sold |
|
60,471 |
|
51.3 |
% |
|
|
48,252 |
|
47.5 |
% |
Gross profit |
|
57,393 |
|
48.7 |
% |
|
|
53,403 |
|
52.5 |
% |
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
50,915 |
|
43.2 |
% |
|
|
47,842 |
|
47.1 |
% |
Income from operations |
|
6,478 |
|
5.5 |
% |
|
|
5,561 |
|
5.5 |
% |
|
|
|
|
|
|
Other income
(loss), net |
|
(629 |
) |
-0.5 |
% |
|
|
(299 |
) |
-0.3 |
% |
Income from
continuing operations before income taxes |
|
5,849 |
|
5.0 |
% |
|
|
5,262 |
|
5.2 |
% |
|
|
|
|
|
|
Income tax
expense |
|
1,558 |
|
1.3 |
% |
|
|
1,564 |
|
1.5 |
% |
Income from
continuing operations |
|
4,291 |
|
3.6 |
% |
|
|
3,698 |
|
3.6 |
% |
|
|
|
|
|
|
Income from
discontinued operations, net of tax |
|
1,282 |
|
|
|
|
313 |
|
|
|
|
|
|
|
|
Net
income |
$ |
5,573 |
|
|
|
$ |
4,011 |
|
|
|
|
|
|
|
|
Basic and
diluted earnings per share: |
|
|
|
|
|
Income from continuing operations |
$ |
0.44 |
|
|
|
$ |
0.37 |
|
|
Income from discontinued operations |
|
0.13 |
|
|
|
|
0.03 |
|
|
Basic earnings per share |
$ |
0.57 |
|
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
2 |
BASSETT FURNITURE
INDUSTRIES, INC. AND SUBSIDIARIES |
Condensed
Consolidated Balance Sheets |
(In thousands) |
|
|
(Unaudited) |
|
|
Assets |
|
February 26, 2022 |
|
November 27, 2021 |
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
31,880 |
|
|
$ |
34,374 |
|
Short-term investments |
|
|
17,715 |
|
|
|
17,715 |
|
Accounts receivable, net |
|
|
25,603 |
|
|
|
20,567 |
|
Inventories, net |
|
|
81,679 |
|
|
|
78,004 |
|
Recoverable income taxes |
|
|
6,696 |
|
|
|
8,379 |
|
Current assets of discontinued operations
held for sale |
|
|
61,888 |
|
|
|
11,064 |
|
Other current assets |
|
|
11,016 |
|
|
|
10,181 |
|
Total
current assets |
|
|
236,477 |
|
|
|
180,284 |
|
|
|
|
|
|
Property and
equipment, net |
|
|
69,303 |
|
|
|
69,168 |
|
|
|
|
|
|
Other long-term assets |
|
|
|
|
Deferred income taxes, net |
|
|
3,073 |
|
|
|
3,189 |
|
Goodwill and other intangible assets |
|
|
14,340 |
|
|
|
14,354 |
|
Right of use assets under operating
leases |
|
|
94,761 |
|
|
|
95,955 |
|
Long-term assets of discontinued operations
held for sale |
|
|
- |
|
|
|
52,757 |
|
Other |
|
|
6,103 |
|
|
|
5,953 |
|
Total
long-term assets |
|
|
118,277 |
|
|
|
172,208 |
|
Total assets |
|
$ |
424,057 |
|
|
$ |
421,660 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
24,377 |
|
|
$ |
23,988 |
|
Accrued compensation and benefits |
|
|
10,924 |
|
|
|
12,639 |
|
Customer deposits |
|
|
54,491 |
|
|
|
51,492 |
|
Current portion of operating lease
obligations |
|
|
20,051 |
|
|
|
20,235 |
|
Current liabilities of discontinued
operations held for sale |
|
|
29,892 |
|
|
|
16,095 |
|
Other current liabilities and accrued
expenses |
|
|
10,609 |
|
|
|
9,770 |
|
Total
current liabilities |
|
|
150,344 |
|
|
|
134,219 |
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
Post employment benefit obligations |
|
|
13,268 |
|
|
|
12,968 |
|
Long-term portion of operating lease
obligations |
|
|
93,333 |
|
|
|
94,845 |
|
Long-term liabilities of discontinued
operations held for sale |
|
- |
|
|
|
16,210 |
|
Other long-term liabilities |
|
|
689 |
|
|
|
686 |
|
Total
long-term liabilities |
|
|
107,290 |
|
|
|
124,709 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
Common stock |
|
|
48,640 |
|
|
|
48,811 |
|
Retained earnings |
|
|
119,557 |
|
|
|
115,631 |
|
Additional paid-in-capital |
|
|
- |
|
|
|
113 |
|
Accumulated other comprehensive
loss |
|
|
(1,774 |
) |
|
|
(1,823 |
) |
Total
stockholders' equity |
|
|
166,423 |
|
|
|
162,732 |
|
Total liabilities and stockholders’ equity |
|
$ |
424,057 |
|
|
$ |
421,660 |
|
|
|
|
|
|
|
|
|
|
|
Table
3 |
BASSETT FURNITURE
INDUSTRIES, INC. AND SUBSIDIARIES |
Consolidated
Statements of Cash Flows - unaudited |
(In thousands) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
February 26, 2022 |
|
February 27, 2021 |
Operating activities: |
|
|
|
|
Net income |
|
$ |
5,573 |
|
|
$ |
4,011 |
|
Adjustments
to reconcile net income to net cash provided by (used
in) operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
3,655 |
|
|
|
3,331 |
|
Gain on lease modification |
|
|
- |
|
|
|
(20 |
) |
Net (gain) loss on disposals of property and equipment |
|
|
(8 |
) |
|
|
(4 |
) |
Deferred income taxes |
|
|
116 |
|
|
|
826 |
|
Other, net |
|
|
778 |
|
|
|
274 |
|
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
|
(4,609 |
) |
|
|
(2,380 |
) |
Inventories |
|
|
(3,675 |
) |
|
|
(8,050 |
) |
Other current and long-term assets |
|
|
781 |
|
|
|
(768 |
) |
Right of use assets under operating leases |
|
|
6,559 |
|
|
|
6,340 |
|
Customer deposits |
|
|
2,999 |
|
|
|
4,912 |
|
Accounts payable and other liabilities |
|
|
(2,194 |
) |
|
|
3,584 |
|
Obligations under operating leases |
|
|
(7,109 |
) |
|
|
(7,072 |
) |
Net cash provided by operating activities |
|
|
2,866 |
|
|
|
4,984 |
|
|
|
|
|
|
Investing activities: |
|
|
|
|
Purchases of
property and equipment |
|
|
(2,424 |
) |
|
|
(895 |
) |
Proceeds
from sale of property and equipment |
|
|
9 |
|
|
|
8 |
|
Other |
|
|
(465 |
) |
|
|
(302 |
) |
Net
cash used in investing activities |
|
|
(2,880 |
) |
|
|
(1,189 |
) |
|
|
|
|
|
Financing activities: |
|
|
|
|
Cash
dividends |
|
|
(1,374 |
) |
|
|
(3,718 |
) |
Proceeds
from the exercise of stock options |
|
|
|
|
- |
|
Other
issuance of common stock |
|
|
93 |
|
|
|
83 |
|
Repurchases
of common stock |
|
|
(765 |
) |
|
|
(534 |
) |
Taxes paid
related to net share settlement of equity awards |
|
|
- |
|
|
|
(219 |
) |
Repayments
of finance lease obligations |
|
|
(434 |
) |
|
|
(173 |
) |
Net
cash used in financing activities |
|
|
(2,480 |
) |
|
|
(4,561 |
) |
Change in cash and cash equivalents |
|
|
(2,494 |
) |
|
|
(766 |
) |
Cash
and cash equivalents - beginning of period |
|
|
34,374 |
|
|
|
45,799 |
|
|
|
|
|
|
Cash
and cash equivalents - end of period |
|
$ |
31,880 |
|
|
$ |
45,033 |
|
|
|
|
|
|
|
|
|
|
|
Table
4 |
BASSETT FURNITURE
INDUSTRIES, INC. AND SUBSIDIARIES |
Segment Information
- unaudited |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
|
February 26, 2022 |
|
|
February 27, 2021 |
Sales Revenue |
|
|
|
|
|
|
Wholesale
sales of furniture and accessories |
|
$ |
83,485 |
|
$ |
70,264 |
Less: Sales
to retail segment |
|
|
(29,728) |
|
|
(29,004) |
Wholesale sales to external customers |
|
|
53,757 |
|
|
41,260 |
Retail sales
of furniture and accessories |
|
|
64,107 |
|
|
60,395 |
Consolidated
net sales of furniture and accessories |
|
$ |
117,864 |
|
$ |
101,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
Wholesale |
|
$ |
3,385 |
|
$ |
4,797 |
Retail |
|
|
3,350 |
|
|
1,094 |
Inter-company elimination |
|
|
(257) |
|
|
(330) |
Consolidated |
|
$ |
6,478 |
|
$ |
5,561 |
|
|
|
|
|
|
|
J. Michael
Daniel Senior Vice President
and Chief Financial
Officer (276) 629-6614 – Investors
mdaniel@bassettfurniture.com
Peter D. MorrisonVice President of
Communications (276) 629-6450 – Media
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